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How did Multiethnic Malaysia Develop?

21 March, 2012

Economic growth of Multiethnic, heterogeneous or plural societies is noted to be less than that of homogeneous societies. Multi-ethnicity, though, cannot be cited as the only major factor, which impedes economic growth in a multiethnic society yet it has its formidable play in making economic progress cumbersome.

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For example, China, a homogeneous society is making more progress than the heterogeneous India.

In the year 1990 there were 103 developing countries with one million or more populations. These countries were divided into ethnically heterogeneous (He) and ethnically homogeneous (Ho) groups. 56 developing countries were listed as He and 47 as Ho. It was observed that there were significant differences between He and Ho groups with respect to their economic growth rate. Ho countries were found more prosperous, on average, than He countries; in the span of 195 to 1990 they showed faster economic progress than He countries.

The Case of Malaysia: Malaysia, too, is a multiethnic society; nevertheless, it made such a magnificent progress that it has become a case of study and research for economic managers, leadership and management, leadership development and executives.

Multi-ethnicity was the major holdup of Malaysian economy. The national resources were unequally distributed between different ethnic groups. Malays held only 2 present of their share in the corporate sector assets, while the rest were held by the Chinese and Indian Malaysians and foreigners. This situation led to racial riots between the Malays and Chinese and Indians.

In May, 1969, there were racial riots erupted between Chinese and Malays in the capital city of Malaysia, Kuala Lumpur, in which mostly Chinese were killed. The causes were basically economic: resentment against imbalance distribution of national economic assets. The government had to announce emergency. It was a great test of leadership and management. To avoid such happenings to recur the Malaysian government decided to take radical steps. In 1970 the government announced the New Economic Policy or NEP for a period of 20 years i.e. by 1990.

According to this policy Malaysia had to undergo a complete reconstruction of economy. In the new plan, Malays were given 30 percent share of corporate sector assets, while Chinese and Indians Malaysians’ share was 40 percent; this was a little above than their present share, while the foreigners share was allocated at 30 percent, which was 65 percent before.

In addition, the process involved upgrading of rural life, rapid and balanced growth of urban and creation of a commercial and industrial Malay community in every category at every level of operations, so that Malays and other indigenous people may have considerable share in all layers of national economy.

In 1970s rapid economic growth was witnessed. Public sector expanded. Fortunately, significant oil and gas reservoirs were discovered. In early 1970 the creation of large free trade zones led to the establishment of labor-intensive electronic and garment industries. Creation of jobs was also rapid in the 1970s, which permitted farmers’ children to get jobs in industrial and service sector. The unemployment rate fell during the whole decade. Some Controversies during the middle years of 1970s over control of the oil industry and application of confirmatory action to private firms were settled through dialogues.

Malaysia is still on its ride of fast economic development, with another 30 year plan, Vision 2020 to become a fully developed country till 2020. This was a brief scenario of the success story of Malaysia, which calls to attention the leadership and management and institutes of leadership development and executive education, especially, of multiethnic countries.

Articles written by Mr. Irfan Shahzad.

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